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Uni debt repayment to take graduates twice as long

MARK COLVIN: The deregulation of higher education in Australia has moved one step closer.

The higher education bill has passed through the Lower House and now moves to the Senate, where it'll face a tougher test.

Labor, the Greens and Independents have voted against the changes.

If passed, they'd lower the threshold at which university students repay education loans.

Melbourne University predicts that it will take female graduates 14 years longer to pay off their debt and male graduates seven years longer.

Rachael Brown reports.

RACHAEL BROWN: If the Federal Government has its way, university graduates will be paying more for degrees from 2016 and entering the workforce with larger accumulated debt.

In the Lower House today Labor's Amanda Rishworth called on the Government to throw the package out and start again.

AMANDA RISHWORTH: We will continue to fight against these changes, we believe these changes are very bad for middle and low income earners, for mature age students, for a whole range of people that had a dream to go to university, but of course that dream has now been dashed.

RACHAEL BROWN: The Greens MP Adam Bandt, and Independents Cathy McGowan and Andrew Wilkie voted against the changes that will mean graduates are paying back more sooner and at a higher interest rate.

They warn Australia risks creating an academic underclass, with regional and country students expected to be particularly affected.

The Independent Member for Denison, Andrew Wilkie.

ANDREW WILKIE: We are a clever country and we are a rich country. Surely we are a clever enough country to understand the value of having the world's best education system. Surely we are a rich enough country to have the world's best funded education system.

RACHAEL BROWN: In Question Time Senator Ricky Muir conceded he's on a good wage now, but what if, after his chamber term, he has to return to his Gippsland sawmill?

RICKY MUIR: If that is the case I worry I will not be in a financial position to be able to support my children to get the quality higher education they choose. And I worry that all my friends still working in the sawmill will be in that position. What should I tell my children when they ask me why the Government wants to deregulate the sector which could put universities out of reach for millions of ordinary Australians?

RACHAEL BROWN: Senator Marise Payne, speaking on behalf of the Education Minister, was keen to point out university deregulation will also extend fee help to diplomas and associated degrees.

MARISE PAYNE: That support is not currently available to students who work, who want to study in those areas, whether it's a diploma or an associated diploma or a pathway course. That will open up opportunities for, we estimate, another 80,000 students over the next five years.

RACHAEL BROWN: But Mr Wilkie says for many opportunities will dry up.

Given the interest rate on the education debt will now accrue at the government bond rate, he says women will be particularly discriminated against.

ANDREW WILKIE: Women tend to, when you look at their professional profile, they'll go to uni, they'll start work, but then they'll drop out of the workforce, perhaps to start a family. But while they're out of the workforce the interest is still accumulating, so they'll end up having this debt the whole of their working life and even beyond conceivably Deputy Speaker.

RACHAEL BROWN: Melbourne University has done some modelling of how much longer it will take graduates to pay back their debt.

The lead researcher is Associate Professor Chris Ryan.

CHRIS RYAN: Basically it will involve about a doubling of the time it takes people. So a male on median earnings, where they probably take about eight years to repay the loan at present, that will increase to about 15 years. And for a female it's going to move from 12 to 26 years. So a very big increase.

RACHAEL BROWN: Twenty-six years?

CHRIS RYAN: Yep.

RACHAEL BROWN: Would these changes potentially put the loan scheme in jeopardy in the future?

CHRIS RYAN: Well I'm a bit worried about that. Many women won't be able to repay the full loan over their working careers. That means to me that if you've got a big increase in the proportion of people not repaying the debt, then that will look like a bad scheme. And at some stage in the future, some future government will decide it doesn't like schemes where so many people default on the debt and the scheme could well be in jeopardy.

RACHAEL BROWN: Bruce Chapman was the architect of Australia's now 25 year old HECS (higher education contribution scheme) scheme, which has been adopted in eight other countries.

He says the scheme copes best with moderately small debts. He says larger ones of $100,000 in some cases will mean big proportions simply won't be repaid.

BRUCE CHAPMAN: I don't think that means that the scheme would be in jeopardy, I don't think that undermines the design aspects of it. But it does mean that increasingly fewer amounts, proportions of the debt, would be collected.

But the Government could live with it. They'll still be getting the majority of the debt back.

RACHAEL BROWN: When you designed the model, did you foresee it could be stretched to accommodate changes like these ones?

BRUCE CHAPMAN: The area that I didn't foresee and hadn't for 25 years, was the interest rate would be changed to the long term bond rate. So I think that was a very long way away from the original motivation for the HECS system.

The HECS system is basically an insurance arrangement. It's designed to ask people to contribute in a way that they're not in trouble. So if they end up not graduating and having a low income job or lower income job as a result, then they need to be protected and having the bond rate undermines that. And that would not have been, it certainly wasn't anticipated by me.